Broker compensation has been a major issue of concern for Council members since October 2004 when New York Attorney General Eliot Spitzer announced he was investigating the insurance industry. One of the results of the Spitzer investigations has been increased scrutiny and regulatory attention to insurance producer compensation. The National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) both adopted model laws requiring insurance producers to disclose their compensation in certain situations, and a number of states adopted producer disclosure requirements.
The Council’s view on transparency is that brokers should advise their clients of their compensation in the most effective way of their choosing, but a business model should not be imposed upon that process through regulatory, legislative or prosecutorial means. The Council also strongly supports a uniform system of transparency for agent/broker compensation.
In 2010, New York adopted a compensation transparency regulation after many months of discussions with the industry. The NAIC adopted a model disclosure act in 2004 which The Council supports, but only one state has adopted it. Other states have enacted a watered-down version of transparency advanced by NCOIL. The NCOIL model would require disclosure only to clients who pay a fee if their broker receives contingent income.